Embed Size (px)
Citation preview
Mälardalens Högskola
School of Sustainable Development of
Society and Technology
EFO703 Bachelor Thesis in Business Administration, 15 hp
June 7, 2011
Managing Selection and
Retention of Employees A Case Study on Länsförsäkringar Bergslagen
Sisi Jin 880223
Kazi Sraboni Quader 880705
Supervisor: Magnus Linderström
Examiner: Ole Liljefors
Acknowledgements
We, the authors, are grateful to all of those who made this thesis possible. We first appreciate each
other for contributing with great efforts to write this thesis and for pushing each other when it was
necessary. We especially want to thank our supervisor Magnus Linderström who gave us a lot of
feedback and supported us with helpful ideas and relevant materials. We would also like to thank the
opposition groups for providing us with their insights. Ann-Christin Palmer deserves a big thank you as
she kindly provided us with a lot of information about Länsförsäkringar Bergslagen during the interview,
and welcomed us to conduct a follow-up interview. Last but not least, we thank our family and friends
for giving us encouragement and support.
Sincerely,
Kazi Quader and Sisi Jin
Abstract
Title: Managing Selection and Retention of Employees: A Case Study on
Länsförsäkringar Bergslagen
Authors: Kazi Sraboni Quader and Sisi Jin
Supervisor: Magnus Linderström
Examiner: Ole Liljefors
Level: Bachelor Thesis in Business Administration
Date: June 7, 2011
Keywords: Employee Selection, Employee Retention, Employee Motivation, Human
Resource Management, Länsförsäkringar Bergslagen.
Research Question: How can a firm such as Länsförsäkringar Bergslagen utilize selection and
retention methods to find and keep employees that add value to the
organisation?
Purpose: The purpose of this thesis is to describe and analyse the process of selection and
retention and how it can affect organisations’ ability to select and retain staff
that perform well and are an asset to the organisation.
Method: Primary information was gathered from a face-to-face interview with the chief
of personnel at LFB, as well as from a follow-up e-mail interview. Secondary
information was gathered from books, journals and the web. The research is
designed as a case study and the approach to analyzing data is qualitative.
Conclusion: From the findings the authors conclude that by using selection methods with
high predictive validity such as structured interviews, cognitive and personality
tests, work samples and assessment centres, while at the same time considering
how these methods affect the candidates attitudes and how well they allow for
the candidate and employer to exchange views, values and goals, is the way
firms can utilize selection methods in order to find staff that will add value to
the organisation. LFB is using all these methods, except for work samples. Of the
others remaining, structured interviews is the most common in LFB. On the
perspective of retention, Länsförsäkringar Bergslagen has developed a
performance-based system which takes an essential role on employee
motivation, where recognition by offering growth opportunities is most
significant in retaining key employees but is also most difficult to be conducted
in LFB as growth opportunities are limited.
Table of Contents 1. INTRODUCTION ......................................................................................................................................... 1
1.1 Research Question .............................................................................................................................. 1
1.2 Purpose ............................................................................................................................................... 2
1.3 Scope of the Study .............................................................................................................................. 2
1.4 Target Audience .................................................................................................................................. 2
1.5 Delimitations ....................................................................................................................................... 2
1.6 Disposition .......................................................................................................................................... 3
2. METHOD .................................................................................................................................................... 3
2.1 Research Design .................................................................................................................................. 3
2.2 Method of Analysing Data .................................................................................................................. 4
2.3 Literature Search ................................................................................................................................. 4
2.4 Data Gathering .................................................................................................................................... 4
2.4.1 Primary Data ................................................................................................................................ 5
2.4.2 Secondary Data ............................................................................................................................ 5
3. THEORETICAL FRAMEWORK ..................................................................................................................... 6
3.1 Storey’s Human Resource Management Model ................................................................................. 6
3.2 Models of Selection and Assessment ................................................................................................. 8
3.2.1 The Psychometric/objective model ............................................................................................. 9
3.2.2 The Social Process model ........................................................................................................... 10
3.2.3 The Exchange model .................................................................................................................. 10
3.2.4 Conclusion on Models of Selection ............................................................................................ 11
3.3. Selection Methods ........................................................................................................................... 12
3.3.1 Structured Interviews ................................................................................................................ 12
3.3.2 Personality/Cognitive Tests ....................................................................................................... 13
3.3.3 Work-Samples ............................................................................................................................ 13
3.3.4 Assessment Centre ..................................................................................................................... 14
3.4 Employee Motivation and Retention ................................................................................................ 15
3.4.1 Needs Theory ............................................................................................................................. 15
3.4.2 Motivator-Hygiene Theory ......................................................................................................... 16
3.4.3 Expectancy theory ...................................................................................................................... 16
3.4.4 Equity theory .............................................................................................................................. 17
3.5 Retention Practices ........................................................................................................................... 17
3.5.1 Goal Setting ................................................................................................................................ 17
3.5.2 Compensation and Rewards ...................................................................................................... 18
3.5.3 Culture ........................................................................................................................................ 18
3.5.4 Supervision ................................................................................................................................. 19
3.5.5 Growth Opportunities ................................................................................................................ 19
3.5.6 Summary .................................................................................................................................... 20
4. EMPIRICAL FINDINGS .............................................................................................................................. 21
4.1 Company Background ....................................................................................................................... 21
4.2 Selection ............................................................................................................................................ 21
4.2.1 Structured Interview .................................................................................................................. 21
4.2.2 References ................................................................................................................................. 22
4.2.3 Tests ........................................................................................................................................... 22
4.2.4 Assessment centres/Work samples ........................................................................................... 22
4.2.5 Predictive Validity vs. Costs ....................................................................................................... 22
4.3 Retention .......................................................................................................................................... 23
4.3.1 Goal Setting ................................................................................................................................ 23
4.3.2 Compensation and rewards ....................................................................................................... 24
4.3.3 Culture ........................................................................................................................................ 24
4.3.4 Supervision ................................................................................................................................. 25
4.3.5 Growth opportunities ................................................................................................................ 25
5. ANALYSIS ................................................................................................................................................. 26
5.1 Selection ............................................................................................................................................ 26
5.1.1 Interviews ................................................................................................................................... 26
5.1.2 References ................................................................................................................................. 27
5.1.3 Tests ........................................................................................................................................... 27
5.1.4 Assessment centres &Work samples ......................................................................................... 27
5.2 Retention .......................................................................................................................................... 28
5.2.1 Goal setting ................................................................................................................................ 28
5.2.2 Compensation and rewards ....................................................................................................... 29
5.2.3 Culture ........................................................................................................................................ 29
5.2.4 Supervision ................................................................................................................................. 30
5.2.5 Growth opportunities ................................................................................................................ 30
6. CONCLUSION ........................................................................................................................................... 31
6.1 Recommendations ............................................................................................................................ 33
References .................................................................................................................................................. 34
Appendix A .................................................................................................................................................. 37
Interview with LFB .................................................................................................................................. 37
1
1. INTRODUCTION
In today’s competitive labour market it is important for organisations to utilize their resources
effectively in order to gain competitive edge. Skilled employees that add value to organisations are vital
to their success, and therefore firms are fighting for skilled human resources (Ullah, 2010:106). Human
resources need to be managed just like financial, physical and information resources. According to John
Storey, “it is the human resources that give competitive edge” and therefore should be selected
carefully and developed in order to achieve employees’ commitment (Storey, 1995:6). In the service
sector, and especially in the financial services sector which Länsförsäkringar Bergslagen (LFB) belongs to,
the major part of the staff are highly educated and highly skilled. It is important that high-skilled
employees who are hard to replace don’t leave their jobs for a more lucrative position elsewhere. High-
skilled employees can be very costly to replace and the loss of co-workers can result in lower employee
morale in the workplace and therefore it is something employers should want to avoid (Sandler, 2008).
One way to prevent high employee turnover is to hire the right people in the first place, and in this
respect selection methods become important. By using the right selection methods one can ensure that
the candidate not only has the right skills for the job, but also possesses the right personality to fit into
the existing organisational culture. Once that “right” person has been employed, it is crucial that he or
she chooses to stay in the company and is given the right incentives to do so. Here, employee retention
comes into play, which is where focus has to be placed in order to keep skilled and valued employees. If
employees leave it incurs the costs of going through the recruitment and selection process all over again
(Ullah, 2010:107).
After the financial crisis and recession organisations are again starting to recruit an increasing number of
employees and trying to retain current ones since there is a rising demand on goods and services
(Rekryteringskanalen, 2011). The topics of selection and retention are present in countless Human
Resources books and journals and are growing in importance (Sandler, 2008). Therefore the question of
employee selection and retention is a noteworthy and relevant topic in today’s business world and
hence it is the topic the authors have chosen to research on.
1.1 Research Question
The two topics of selection and retention are connected in the sense that both focus on employees; with
recruitment and selection dealing with future potential employees, and motivation and retention
focusing on current employees in the organisation. The research question that incorporates both these
areas is:
How can a firm such as Länsförsäkringar Bergslagen utilize selection and retention methods to find and
keep employees that add value to the organisation?
2
1.2 Purpose
The purpose of this thesis is to describe and analyse the process of selection and retention and how it
can affect organisations’ ability to select and retain staff that perform well and are an asset to the
organisation. Furthermore the purpose is to apply the theoretical findings to a case study of
Länsförsäkringar Bergslagen, a Swedish company that deals with insurance, banking and real estate.
1.3 Scope of the Study
The scope of the study consists of researching one large organisation in Sweden in the financial service
industry – Länsförsäkringar Bergslagen. This company was chosen because they use various selection
methods and retention techniques so that the authors could study how these methods are used in
practice and compare them to the theory. It was chosen also because of the close proximity of the
company’s office to the authors, as their office is located in Västerås close to where the authors live, and
the availability of the interviewee to conduct an extended face-to-face interview and eventual follow-up
interviews.
1.4 Target Audience
The possible audience for this thesis would be students who are studying Human Resource Management
in Business Administration programmes or other similar programmes, managers who want to learn
about how to select and retain valued employees to increase competitive advantage for their
companies, and academics who are interested in or intend to research more on this topic.
1.5 Delimitations
This thesis does have limitations. One of them is that this is a case study on one organisation and
therefore there will be no comparison made among several companies. Hence the conclusion we come
up with will only refer to the company being scrutinized in our case study. The findings will not be
general or representative to the industry. However, the findings may be considered in other
organisations and inspire them to look into their own selection and retention practices.
Another limitation may be that most of our empirical data have been gotten from our primary source.
This may be a drawback since it is one person’s subjective opinion rather than objective, statistical
information. However, we feel that the information given to us is still of relevance and importance to
our work and we have included many secondary sources as well to balance it up.
3
1.6 Disposition
In this thesis the authors first describe the method for conducting information search in chapter 2. In
chapter 3 we lay our theoretical framework forward, with a general theory on Human Resource
Management first that encompasses both selection and retention, then continuing on to focus on
theories and models on selection and retention specifically. We discuss selection and retention methods
in that chapter while drawing elements from the theory while discussing them. In chapter 4 we present
our empirical findings and from that we have come up with our analysis in chapter 5 where we bind the
theoretical models and concepts in with the empirical data from LFB. In chapter 6 we draw our
conclusions and state our recommendations to LFB.
2. METHOD
Here the authors of the thesis discuss the methods used for gathering and analysing the data found
throughout the thesis.
2.1 Research Design
The authors want to obtain an in-depth understanding of the research topic and therefore decided on
carrying out a case study as the research approach. With a case study you can get a more holistic
account of the subject and it can help you figure out the interrelationships between factors. With the
survey approach you can get more broad and representative overview. So while surveys give you
breadth in a study, case studies give you depth. Yin (cited in Fisher, 2007:69) identified some
characteristics of a case study, some of which are:
It investigates a contemporary phenomenon within its real-life context.
It has a single site, such as a team or an organisation, but many variables.
It can accommodate both quantitative and qualitative material.
Theoretical propositions tend to be developed prior to the study to guide data collection.
Those characteristics do match our research. Case studies are a good way to study contemporary
events, and selection and retention seem to be a contemporary topic right now, with the recession
lifting and more people hiring. We are focusing on one organisation, Länsförsäkringar Bergslagen, yet we
are looking into several variables such as selection, motivation, retention etc. Although case studies can
incorporate both quantitative and qualitative data, the data used for this paper will be more of the
qualitative character, which is more descriptive and interpretive than quantitative data which is
measurable and precise (Fisher, 2007).
Case studies can be a very good tool to provide insight and resonance to the reader about the issue at
hand, but case studies generally lack representativeness. Implications from one case study done on one
organisation can’t be generalized to other organisations in the industry or that have the same issue.
Although it lacks representativeness, case studies can still encompass generalisability. Case studies can
4
let you make generalisations about organisational processes. It may not be possible to make a statistical
generalisation but it is to make a theoretical one. In other words, you can’t claim that is the case in all
circumstances but you can claim that it may be a factor that needs to be considered when generalising
about this particular subject (Fisher, 2007).
2.2 Method of Analysing Data
As stated earlier the authors have taken the qualitative approach to analyse the data gathered. For this
purpose, qualitative research can be defined as follows: “Qualitative research involves analyzing and
interpreting texts and interviews in order to discover meaningful patterns descriptive of a particular
phenomenon” (Auerbach & Silverstein, 2003:3). Qualitative data describes whereas quantitative data
defines (2003:3). The authors have looked into the findings and tried to interpret them in a non-
statistical way and tried to discover relationships between different variables and factors and see if they
have any implications on the theoretical framework.
2.3 Literature Search
The research is developed on the basis of literature reviews whose sources can be gathered from books,
journals, the World Wide Web and other dissertations. In this thesis, relevant books and journals have
been collected from the Mälardalen university library, e-books, websites and online databases that we
got access to from the library in University of Hertfordshire in England where one of the authors
previously studied, for example Business Source Complete, Emerald, Blackwell, SAGE etc. The authors
have looked into these materials and have done more research and literature reviews while continually
finding more articles. The authors have also found a numbers of Bachelor’s and Master’s dissertations,
from a database system of Mälardalen University—DIVA, which has helped with the generation of more
ideas for the thesis and has acted as inspirations. Keywords used to search on DIVA were, amongst
others, selection methods, retentions methods, Human resource management, HRM, employee
turnover, employee commitment, motivation, recruitment, Länsförsäkringar etc.
2.4 Data Gathering
The method of empirical data gathering can be divided into two parts—primary data and secondary
data. Primary data is the outcome of observation learning conducted by the authors, including interview
as a qualitative participation observation process. While the secondary data is already gathered by
someone else for other purposes (Saunders et al., 2009). Since this research is about a company’s
internal HR process, there is few secondary data available and it is hard to be studied in depth by using
these rare existing sources. Thus, this empirical research is mainly depended on primary data gathered
5
from interviews as the primary research approach, conducted by the authors and complemented by
secondary data from the internet.
2.4.1 Primary Data
The authors planned to gather empirical data by interviewing at least one company concerning their
selection and retention process since one of the authors had collected contact information from a few
different companies from the MDH university job fair – Högvarv. Amongst them was ABB, a large
multinational company in the engineering industry with their main Swedish office in Västerås, who we
got into contact with and were interested in interviewing as we felt they might have relatively well
developed selection and retention methods. A one hour interview was conducted with an employee
from this company at their office and a lot useful information was gathered from it and we even started
to work on our thesis with the objective of using this company for our case study. However, the
interviewee wished to remain anonymous, and the company as well. We, the authors, want the
company used in our thesis to be known and therefore work was started to find a new company for the
case study instead. However, we learned a lot from conducting that interview which led us to better our
interviewing technique for the next interview we conducted for the purpose of this thesis. Our
knowledge on this subject widened because of that interview. We also realized that the number of
questions was a bit too many and therefore cut them down for the upcoming interview.
The authors then focused on studying the selection and retention process at Länsförsäkringar
Bergslagen (LFB), who also became a contact from the job fair. Ann-Christin Palmer is the chosen
interviewee who is the Chief of personnel. The original format for the interview was an e-mail interview
since the authors thought this way the interviewee can have time to think over their answers and
provide deep, meaningful answers rather than if they were put on the spot and had to say something
quickly over the phone or in person. However, once contacted the interviewee wanted to conduct a
face-to-face interview instead, as she didn’t have time to write down the answers. On May 10th 2011, a
one hour face-to-face interview was conducted in at the LFB office in Västerås. The interview was
conducted in Swedish. The responses were recorded, written down and then translated to English by
one of the authors. The research is much relied on this interview and that is why the interview questions
formulated by the authors are many and extensive. A follow-up interview was also conducted through e-
mail on the 26th of May.
2.4.2 Secondary Data
Secondary empirical data was gathered by searching for information that mainly comes from LFB itself,
so the authors looked at their website and press releases and annual reports. The authors found and
used several annual reports from recent years in both English and Swedish. There was information on
LFB’s website in both English and Swedish as well, although predominantly in Swedish since it is a
Swedish company.
6
3. THEORETICAL FRAMEWORK
Here the authors present theoretical concepts and models, starting off with a general human resource
management model by John Storey, and then deepening on models and concepts on selection and
retention respectively.
3.1 Storey’s Human Resource Management Model
Over the last few decades, the theories on human resource management have developed a great deal.
One way it has developed is from the resource-based theory of the firm developed in corporate strategy
literature, which states that sustained competitive advantage comes from the internal resources of a
firm. The resources must have four qualities: they must add value, be unique or rare, difficult to imitate
and be non-substitutable e.g. by technology. Human capital resources fit these qualities rather well and
it embodies intangible assets to a firm (Storey, 1995:4).
In management terms, human capital or human resources refers to different attributes or traits
employees bring to their job. It can include intelligence, ability to learn, skills, attitude, knowledge etc.
(Bratton & Gold, 2007). Theodore Schultz argued that economic development depends on the
application of human knowledge, and he called it human capital (Schultz, cited in Bratton & Gold, 2007).
Schultz gives his definition: “attributes of acquired population quality, which are valuable and can be
augmented by appropriate investment, will be treated as human capital” (2007:8). Since human
resources are so vital to an organisation, managing this aspect of the business is crucial.
Human resource management (HRM) has been defined as “a distinctive approach to employment
management which seeks to achieve competitive advantage through the strategic deployment of a
highly committed and capable workforce, using an integrated array of cultural, structural and personnel
techniques” (Storey, 1995:5). Storey presents an HRM model with 4 dimensions: beliefs and
assumptions, strategic qualities, critical role of managers and key levers. The key elements of the model
are summarized below (1995:6).
1. Beliefs and assumptions
That it is the human resources which gives competitive edge.
That the aim should not be mere compliance with rules, but employee commitment.
That therefore employees should be carefully selected and developed.
2. Strategic qualities
Because of the above factors, HR decisions are of strategic importance.
Top management involvement is necessary.
HR policies should be integrated into the business strategy.
3. Critical role of managers
7
HR practices are too important to be left to personnel specialists alone because it is essential to the
core business activities.
Line managers need to be closely involved as deliverers and drivers of HR policies.
Greater attention is to be paid to the management of managers.
4. Key lever
Managing culture is more important than managing procedures and systems.
Integrated action on selection, communication, training, reward and development.
Responsibility and empowerment can be encourages by restructuring and redesigning jobs.
Although this is a general model of HRM that involves many different aspects, it is applicable to our
research question, especially the beliefs and assumptions. The importance of people as a resource is
emphasized as the foundation of this model which is also the core idea of this thesis, that employees are
a critical resource and therefore need to be selected carefully and retained and that strategies need to
be put into place for selection and retention. Otherwise organisations may not get the most value out of
this very critical resource that skilled employees are.
As Storey puts it, the most fundamental idea is that “it is the human resource among all the factors of
production which really makes the difference” (Storey, 1995:5). He states that human commitment and
capability is what sets successful organisations apart from the rest and therefore it logically follows that
human resources should be handled with great care. It requires managerial time and attention and
should be thought of as an asset, not merely a cost. The second element in the model deals with
strategy. HRM is of strategic importance to organisations and should be tended to by chief executives
and senior management. The third element deals with the role of managers, and here Storey holds that
line managers should be involved in HRM policies since they often deliver day-to-day HR policies to
employees such as performance appraisal meetings, target setting, conducting team briefing etc. And
finally the fourth element deals with the key levers that used when implementing HR policies. There has
been a shift from procedures and rules as a way to guide good practices to managing organisational
culture as a way to guide good practices and this is considered to be a good way of forming employee
commitment. Committed employees would go the extra mile to reach organisational goals (Storey,
1995).
Storey also makes a distinction between hard and soft models of HRM. The hard model stresses the
importance of integrating HR policies with business strategy and using HR systems to drive the strategic
objectives of the organisation. This means that HR policies not only support business objectives but
achieve it “by their own coherence”, or on their own (Legge cited in Storey, 1995:35). From this
perspective human resource is just a factor of production like land and capital and it is simply a cost of
doing business. Essentially, the hard model highlights the quantitative, calculative and business strategic
aspects of managing HR just like it is like any other economic factor. As Legge puts it, “its focus is
ultimately human resource management” (cited in Storey, 1995:35), which through our interpretation
8
means that the human side is not important; employees are simply another resource to manage, like
land or machines.
The soft model on the other hand also underlines the importance of integrating HR policies with
business objectives but it sees employees as a valued asset and as a source of competitive advantage.
Here employees are proactive rather than a passive factor of production, who are capable of
development and collaboration. Employee commitment is achieved through communication, motivation
and leadership, not by rules and regulations. Employees’ commitment will result into better economic
performance. In the soft approach, the focus is on human resource management (Legge cited in Storey,
1995:35). Here the human side is more important and so are the resources that humans bring to an
organisation.
Although the hard and soft models are clearly different, both may be true for different situations and
there may be situations which contain both elements. For example, an organisation wanting to grow by
adding long-term value might see their core employees as resourceful humans to be developed by HR
policies, while a company competing in a labour-intensive, low-cost industry might see employees as
simply a resource or a factor of production who’s cost needs to be minimized. But clearly, to add value
in an organisation your core employees, meaning highly-skilled and hard-to-replace employees should
be treated from the soft approach. In this thesis, the concept of human resource management from the
soft approach is more appropriate as we are looking more into highly-skilled, high-performance
employees as organisations would probably not put as much economic resources into selection and
retention procedures for low-level and low-skilled employees, since generally they would require less
training and would be more easily replaced.
The general HRM model by Storey will be used as the theoretical guideline for this thesis and will act as
an umbrella under which the more specific theories on selection and retention will be encompassed.
This model was chosen because it emphasizes employee commitment, employee selection and
development in its basic assumptions and beliefs, and these topics are the subject of this thesis.
Therefore it provides a good analytical framework for the thesis as it legitimizes the practice and
procedures of selection and retention as a distinctive HR practice.
3.2 Models of Selection and Assessment
The authors have chosen to cover three models of selection, one of them being the traditional
psychometric/objective model which is mentioned greatly in human resources literature. Then we have
chosen two newer models to contrast the traditional model with, as they have come up as a reaction and
an alternative to the traditional method.
9
3.2.1 The Psychometric/objective model
The psychometric model has been developed in the US and it defines a “best practice” method for
selection (Bach, 2005:116). Its principal focus is on the job which is seen as a set of distinct tasks (Lles &
Salaman, cited in Storey, 1995:219). Also, known as the traditional model, it sees the process of
selection as organisations trying to match the individual to the job which can be compared to solving a
jigsaw puzzle. As Bach puts it, “recruitment and selection is a process of selecting the correct jigsaw
puzzle (the ‘right’ individual) from the incorrect pieces (the ‘wrong’ individuals) to fit into a particular
hole in a jigsaw puzzle” (2005:116). Certain criteria for performance like skills, knowledge and abilities
are chosen to be the predictors of job performance. These characteristics are then measured by
different selection procedures like interviews, tests etc. These assessment procedures are validated in
terms of criteria related predictive validity, or in other words, how well these predictors like personal
characteristics actually predict future performance on the job. This is expressed by a correlation
coefficient, where 1.0 shows perfect correlation and 0.0 shows none at all (Pilbeam & Corbridge,
2006:173). If a certain test has a correlation coefficient of 0.0, it means that the test doesn’t predict
future job performance at all. A test with a coefficient 0.7 means it predicts future job performance
quite well and can be used as a method of employee selection.
In this model, individualism is valued since individual characteristics are used to predict individual
performance. One challenge of using individual characteristics for predicting people’s future job
performance is that people may change over time. Some attributes that may have gotten someone
chosen for a job, may not be there anymore after a few years (Lles & Salaman, cited in Storey,
1995:220). A positive person may become bitter after a few years depending on their life experiences.
Hence people’s changing characteristics need to be taken into consideration. Other challenges is that it
assumes that one can objectively asses individual attributes and that job content doesn’t change much
over time, which may not be the case. As Bach states it, there may not a “fixed jigsaw hole” to fill as the
job description may change over time (Bach, 2005:138). Also, it assumes that you can measure job
performance objectively, but in practice, many organisations don’t use objective measurement, rather
rely on supervisors’ subjective opinions (Lles & Salaman, cited in Storey, 1995:220).
There are many strengths to this model as well, since individual performance do differ and contribute to
differences in organisational performance and therefore assessing individual attributes compared to the
job at hand makes sense. However, things have changed a lot, for example organisations are
restructuring, decentralizing, and job tasks have become more fluid and may not stay the same over
years, or even months. Now more focus is turning towards multi-skilled, flexible and self-directed work
teams. Employees are becoming more empowered and the role of supervisors has changed due to that
(Lles & Salaman, cited in Storey, 1995:220). Consequently a new “process” model of assessment has
developed in Western Europe which has stemmed from social psychology.
10
3.2.2 The Social Process model
The social process model places selection “in a broader theoretical perspective of human abilities,
personality, motivation and skill acquisition” (Lles & Salaman, cited in Storey, 1995: 221). This model
also looks at environmental factors and their impact on individual attributes. It is less concerned with
measurement, prediction and job performance and focuses more on relationships, attitudes,
interaction, identities and self-perceptions. It considers the selection process as a social process and
especially considers how this process impacts the candidates. Selection decisions and candidates’ own
attitudes to the selection process affects many things like career attitudes and self-esteem which may
lead to withdrawal from a job (1995:221).
The model makes several assumptions that contrast the psychometric model. One of them is that
individuals do constantly change during their career which is evident as career transitions are now more
common. It is now rare to have a job-for-life. That’s why importance is laid in training and development
of employees in organisations. The fact that you should test people’s attributes that can change over the
course of time, as in the psychometric model, is challenged here. Another assumption is that subjective
self-perceptions are important for work motivation and performance and these are influenced by
selection and assessment methods. If the candidates perceive the selection methods to be negative it
might affect their motivation and performance. Today’s jobs include more and more interaction,
negotiation and mutual influence and it is suggested that it might be why Europeans still use the
interview as the main selection method, since it allows the candidate to practice interaction, negotiation
and mutual influence. Another critique is that much of the practices that the psychometric model
advocates are not widely used in practice. Firms’ recruitment and selection procedures are normally
more guided by custom and practice rather than which method gives higher predictive validity (Lles &
Salaman, cited in Storey, 1995:222).
In general the social process model emphasizes how the candidates themselves feels about the selection
procedures, how it affects their attitudes on the job and organisation and that it may even affect how
they view their career. Therefore attention needs to be paid on using fair, accurate and adequate
methods. Unfair selection methods may leave the candidate with lower- self-esteem and negative
feelings for the organisation. Assessment centres are generally viewed as a fair selection method since
candidates get several chances to show their competence and if rejected they feel that it wasn’t only on
one account (Arnold & Sylvester, 2005:220). For this reason organisations and candidates would benefit
if selection methods were chosen after the criteria of fairness.
3.2.3 The Exchange model
Peter Herriot, the author of the exchange model, too presented a different approach to the traditional
psychometric one. He argued that it is best to view selection as a process of exchange or negotiation
between two parties: the employer and the candidate (Newell, cited in Bach, 2005:142). Herriot argues
that both of the parties have their own expectations about needs and values and during the process of
selection information is exchanged to determine whether the two parties are compatible with each
11
other and whether they can work together in the future toward a common goal. Neither party is seen as
having fixed characteristics, although the underlying values of both sides are considered to be stable.
Selection isn’t a one-sided process where the employer has all the decision-making power. For
successful commitment from the candidate in the future there has to be an exchange. If the parties
can’t come to a negotiation, then the process breaks down, which is however a good thing since the
candidate wasn’t right for the organisation anyway and neither was the organisation right for the
candidate, since their expectations, needs and values did not match (Newell, cited in Bach, 2005:143).
This approach also advocates that the selection process can’t be seen as an isolated event from the
internal organisational activities, since in order to avoid early turnover and lowered commitment, the
organisation needs to be receptive to the new recruit. Commitment and turnover are greatly impacted
by the opportunities employees have once inside the firm and this is when retention strategies become
extremely important. Both the psychometric/objective and the exchange model of selection stress fit
between the person and the job environment. The difference is that in the traditional psychometric
approach it is based on fixed aspects of the person and the job, with only the employer assessing
whether there is a fit. In the exchange approach, “fit is the outcome of a process of exchange and
negotiation” (Bach & Sisson, 2000:132).
3.2.4 Conclusion on Models of Selection
To conclude on the models just discussed, evidently the traditional method has been critiqued for not
keeping up with the changing nature of jobs and people, and the other two models of social process and
exchange do provide sound insights. Selection can’t just be a one-way process; both parties’
expectations need to be met and you need to be aware of people’s changing characteristics and the
changing characteristics of jobs. However, the strengths of the traditional approach can’t be denied.
Although it may not be possible to be a 100% objective when it comes to measuring candidates and
even determining which methods are more valid, it is however important that the methods are ranked
in predictive validity so that completely useless methods are discontinued. Selection methods’ ranking
according to predictive validity is present in countless HR literature, even in newer ones, so this idea is
useful because it can help firms in choosing their employees and choosing the right employees is
essential to organisations. If you get the right people the first time, you save costs of turnover, and thus
recruitment, training and development, lost productivity, lost corporate knowledge, lowered
commitment and morale in remaining employees, etc. The difference between an average performer
and a high performer can be colossal (Cook, 2005:281) and therefore the right methods need to be
applied when selecting new high-skilled staff. Even thought the social process model and the exchange
model has come up as a reaction to the traditional model, we believe that those two models can in fact
act as complements to the traditional theory. Therefore, the next section deals with several selection
methods and their usefulness in terms of predictive validity from the traditional perspective, as well as
considering some concepts of the two alternative models.
12
3.3. Selection Methods
Selection methods are interesting to study because it seems that only a few selection methods are
commonly known and used, namely the application letter, CV, references and unstructured interview. In
the literature these forms of selection methods are known as the traditional methods (Arnold &
Sylvester, 2005; Foot & Hook, 2005; Pilbeam & Corbridge, 2006; Price, 2007). Some of these methods
can be seen as outdated and subjective, for example references. Cook (2005:72) even goes to say
“references are rarely a useful source of information, as they generally lack reliability or validity”. One of
the reasons may be that candidates rarely leave a reference that will give them a negative review.
However, there are other more innovative and reliable selection procedures identified in the literature.
They are discussed in terms of predictive validity, an important concept in measuring the value of
selection procedures. As previously mentioned, predictive validity refers to how valid a selection
method is in predicting future job performance. Predictive validity of selection methods is compared by
using a correlation coefficient to measure the probability that a certain method will predict performance
in a job. A correlation coefficient of 1.0 represents perfect, 100% prediction, 0.5 represents 50 % chance
that the selection method will predict performance and 0.0 indicates no correlation at all between the
selection method and job performance (Pilbeam & Corbridge, 2006:173). Several of the alternative
methods are discussed below and they have been chosen because they all have relatively high
predictive validity and might be of interest to organisations wanting to improve their selection process.
3.3.1 Structured Interviews
To describe structured interviews it might help to know about unstructured interviews mentioned as
part of the traditional approach first. Unstructured interviews neither have a fixed format or set of
questions to be answered nor a fixed procedure for scoring responses (Schmidt and Hunter, 1998).
Schmidt and hunter claim that only a general evaluation is given to each applicant on the basis of
subjective judgments and impressions of the interviewers, which they established from a meta-analysis
of 85 years of research in personnel psychology (1998: 267). Evers et al. (2005:123) state that the
interviewer and interviewee come to the session with expectations, intentions and needs that have a
certain impact on the subsequent interaction and the exchange of information. This fits in with the
exchange theory discussed previously. Arnold & Sylvester (2005:178) points out that unstructured
interviews have been criticized for being unreliable and vulnerable to bias. They describe the process as
an informal chat between an interviewer and employee and attributes it low predictive validity.
Structured interviews differ from unstructured interviews in several respects. The questions are
structured, sometimes completely scripted, and the interviewers’ judgements are often structured by
rating scales or checklists. Before a structured interview is conducted a detailed job analysis is usually
done to ensure that the questions are related to the job being recruited for (Cook, 2005:49). To correct
faults of unstructured interviews, Arnold & Sylvester (2005:178) suggests ensuring that questions are
consistent across interviewers and interviewees and that a consistent set of criteria is being used to
13
evaluate interviewee responses. Structured interviews have been found to have twice the validity of
unstructured ones and structured interviews based on job analysis achieved high predictive validity of
0.87. To enable the interviews to be done correctly and to avoid bias, it is important that the
interviewers are properly trained and don’t simply choose candidates they get along with the best
(Cook, 2005:51).
Interviews are a great way for the interviewer and the candidate to exchange their beliefs and goals, as
this is one of the selection methods where communication is what it is all about; they can’t do this on a
personality test for example. Therefore from the exchange model’s point of view, interviews are a
perfect selection method because it gives the candidate the chance to evaluate the employer as well
(Newell, cited in Bach, 2005:221). For this reason interviewers need to realize that they are also being
assessed, and therefore need to make a professional and likable impression.
3.3.2 Personality/Cognitive Tests
Personality tests measure personal behavioural preferences, or how you like to work. They don’t
measure your abilities but rather how you perceive yourself, relate to others, handle problems and how
you deal with feelings and emotions (SHL, 2008). According to Pilbeam & Corbridge, (2006:173)
personality tests have a predictive validity of 0.4 of 1; it predicts the work behaviour of the candidate
correctly 40 % of the time. However, personality tests based on job analysis with particular criteria in
mind should demonstrate better predictive validity than global, bought off-the-shelf tests. If the
predictor and criterion variables are matched carefully it can increase the validity of the personality test
significantly (Arnold & Sylvester, 2005:121). Although personality tests have a decent predictive validity
correlation it should not be used as the sole basis for decision-making for any personnel selection (CIPD,
2005). However, from the social process model perspective, the authors believe that one should avoid
sensitive, personal questions that aren’t all that related to the job, because you don’t want to cause
negative feelings from any selection process otherwise the candidate’s perception of the company
might be affected.
Cognitive tests are designed to measure the capability of individuals to process information and use the
information to behave effectively. There are three frequently used forms of cognitive tests which are
numerical reasoning, verbal reasoning and abstract reasoning. As described in Schmidt & Hunter’s meta-
analysis (1998:266) cognitive tests are the number one best predictors of future job performance. With
a predictive validity for high-complexity thinking jobs of 0.58, cognitive tests are not only highly
accurate, they are also very cost-efficient and easy to evaluate in larger recruitment programmes,
especially in matters of online recruitment as stated in Arnold & Sylvester (2005:184). Combined with
structured interviews, cognitive tests have a correlation of 0.63 (Schmidt & Hunter, 1998:272).
3.3.3 Work-Samples
Work-sample tests are designed to closely simulate the actual job tasks which the applicant would be
working with on the job (Pilbeam & Corbridge, 2006:186). Depending on how closely it relates to the job
14
being recruited for, these simulation tests have high face validity, meaning it measures what it is meant
to measure. They also have high predictive validity; according to Pilbeam & Corbridge (2006:173), work-
sampling has a predictive validity of 0.5, so it correctly predicts future performance on the job 50% of
the time. However it is hard to identify the contrast validity of some aspects i.e. sample tests may be
testing quite a few traits but exactly which traits may be hard to indicate (Arnold & Sylvester, 2005:187).
According to Price (2007:375), work samples are a far better selection method than for example
interviews since candidates can easily exaggerate their abilities or try to hide their shortfalls in an
interview situation, while during a work-sample test they cannot. Another advantage of work-samples is
that simpler forms of it are relatively easy to organize such as typing tests for secretarial jobs, or
presentations and reports for managerial jobs. A more sophisticated work-sample test is the in-tray
exercise, normally used to assess for managerial jobs where the candidates are given a tray with for
instance letters to answer, reports to analyze and more (2007:376). However, there are some
disadvantages. It can be costly to administer, it only tests tasks that need to be done in a short period of
time and therefore doesn’t predict performance on tasks that takes longer, and it usually tests tasks that
are relatively simple (HR-Guide, 2001). Another issue might be one of objectivity as these tasks are
judged by assessors and there is the human factor involved. If not properly trained, assessors might lose
their objectivity and judge different candidates on different basis (Price, 2007:376).
3.3.4 Assessment Centre
An assessment centre (AC) is a process used by organisations for selection which involves candidates
performing a number of various tasks. The tasks may include work samples, role play, presentations,
group discussions, personality tests and more (Foot & Hook, 2005:212). These tasks should reflect the
job the candidates are applying for and should be connected to the job description and person
specification (CIPD, 2009). In an assessment centre candidates are given the chance to show different
aspects of themselves and a bigger range of abilities than they would be able to with simply one
selection method, for example an interview.
The predictive validity of assessment centres is quite high compared to other selection methods. ACs for
development or promotion have a correlation of 0.7. ACs for job performance have a correlation of 0.4
(Pilbeam & Corbridge, 2006:173). However, the question of reliability can be raised. For instance, one
candidate may be judged differently based on who the assessor is; one assessor may be more lenient or
stricter than another. Also assessors may be inconsistent in their evaluation from one candidate to
another, so there may be an objectivity issue (Arnold & Sylvester, 2005:222). As ACs are very labour
intensive, the ratio of assessors to candidates is usually 1:2, importance needs to be placed in the
training of the assessors (Pilbeam & Corbridge, 2006:188).
ACs have many benefits, one of which is that they are more reliable and valid because they make use of
a combination of different exercises. According to Arnold and Sylvester (2005:171), it is never sufficient
to rely on one type of predictor only; you should use several different types of testing to test several
aspects of a person and that is why ACs are better predictors of future job performance. The candidates
themselves have reported to perceive them as fairer than other selection methods because they are
15
given more chances to show their performance level, rather than on simply an interview (Arnold &
Sylvester, 2005:222). This aspect from the Social Process point of view is very positive since the
candidates’ positive view on the selection process they go through leads to positive views of the
company as well (Lles & Salaman, cited in Storey, 1995). There are, however, some negative aspects to
ACs. They demand a lot of time, effort and costs and there is a lot of preparation involved (Foot & Hook,
2005:213). It is most likely due to the high costs that ACs are predominantly used by large organisations
and for recruitment for important positions like managerial or graduate trainee positions.
Once the selection process is over and the person or people of choice have been hired, the concepts of
employee retention become important to study in order to understand how to retain these critical
resources that employees are that have been integrated into the organisation. These topics are
discussed below.
3.4 Employee Motivation and Retention
Motivation is a topic of interest when we talk about employee retention. It is seen as a major element of
any theory that explains and predicts organizational behavior (Cummings & Staw, 1997:58). Mitchell
defined motivation as “psychological processes involved with the arousal, direction, intensity, and
persistence of voluntary actions that are goal directed” (cited in Cummings & Staw, 1997:58). If there is
no such direction supported by organizations, employees would lose commitment to their jobs and
hence perform poorly or even think about alternative jobs. Thus, as Ramlall (2004:53) argued,
motivation affects employee retention. Among the numerous theories of motivation, he highlighted the
most relevant ones and stated that HR practices of employee retention can be developed and
implemented on the basis of understanding these theories. As Robbins stated, “motivation is the
willingness to exert high levels of effort toward organizational goals, conditioned by the effort’s ability
to satisfy some individual need” (cited in Ramlall, 2004:53).
Thus, the authors of the thesis chose four kinds of basic motivation theories with starting from needs
theory. Needs theory is a fundamental theory which has been used in many fields. A similar theory,
motivator-hygiene theory, develops needs theory in the HR field and focuses more on job itself.
However, needs sometimes mean different for different people. Expectancy theory and equity theory
thus complement the above two theories on individual perspective.
3.4.1 Needs Theory
One of the most significant psychological theories is Maslow’s “hierarchy of needs” which indicates
there are five levels of personal needs, including physiological, security, love, esteem and self-
actualization. Only when a low-level demand has been satisfied, a new level of needs emerges and need
to be fulfilled (Maslow, 1970). Need is what motivates humans. Humans, at least in the western world
are generally no longer motivated by physiological needs (e.g. the need for food) because they are
16
already fulfilled, but more by psychogenic needs. Thus, McClelland concluded that there are three
fundamental needs of personality: the need for achievement, affiliation and power (Ralall, 2004:55).
Steel & König emphasized that these needs are not stable but tend to fluctuate in intensity, which can
be influenced by external cues (2006:895). These theories can be useful to this thesis as it is important
to find out what employees are motivated by, so that organizations can offer solutions to employees
that motivate them and in turn help to keep them in the company. According to needs theory, since the
bottom level needs are probably already fulfilled, employee’s esteem and self-actualization needs play a
role in keeping an employee happy at their job. Esteem might be achieved with praise and awards, while
self-actualization could be achieved by development and promotions.
3.4.2 Motivator-Hygiene Theory
Herzberg’s Motivator-Hygiene Theory is an alternative motivation theory to needs theory (Herzberg,
1987). It is distinguished motivators which generate job satisfaction from hygiene factors which lead to
poor satisfaction and employee turnover. In other words, motivation would only be the result of using
motivators and, on the other hand, the lack of hygiene factors can bring about dissatisfaction instead of
motivation. Although it is similar to the needs theories, Herzberg’s theory develops that people are only
motivated by self-actualization needs (Herzberg, 1987:8-9). Self-actualization refers to people’s “desire
for self-fulfillment, namely, the tendency for them to become actualized in what they are potentially”
(Maslow, 1970:22). Examples of these two kinds of factors are as following:
Hygiene factors: company policies, supervisory practices, or wages/salary, which are extrinsic to the job
Motivator: recognition, achievement, or personal growth, which are intrinsic condition of the job
(Herzberg, 1987). Companies should of course have the hygiene factors, but realize that they are not the
main motivators to employees.
3.4.3 Expectancy theory
However, both of the needs theories and Herzberg’s theory have received criticisms that they are too
general to fit individual differences, although they are historically important. Instead, expectancy theory,
which can handle this problem, suggests that “people choose their behavior based on their own
perceptions of whether the behavior is likely to lead to valued outcome” (Cummings & Staw, 1997:82).
This theory, firstly contributed by Vroom in 1964 and reviewed and extended by a number of
researchers, claims that employees are motivated when they perceive they would get a certain
attractive outcome if they have taken a certain level of actions. However, it should depend on whether
individuals have the ability to conduct this desired level of action. If employees perceive the desired
outcome is too difficult to be achieved for them, they would not be motivated at all (Lawler & Jenkins,
1992:12). This theory states that employees need to be recognized and the reward system should be
visible in order for their performance to be motivated. It complements needs theory and motivator-
hygiene theory that one‟s needs might not only be different from others but also can be influenced by
others. This implies that a company can shape employees‟ attitudes by transferring social norms.
17
3.4.4 Equity theory
Equity theory holds that individuals are motivated not only by measuring the balance between their
efforts, performance and rewards but by comparing these with others (Ramlall, 2004:55). The term
„others‟ refers to co-workers, friends or people outside his/her organization that are at the same level
of position or performance. If employees perceive their rewards, either material or psychological, are
less than others, they would feel treated unequally and hence change their attitude to the job, reduce
their performance level, or even leave their organization. It emphasizes that people might modify their
needs after comparing with others. Organizations should, at least internally, reward fairly in order to
avoid dissatisfaction.
3.5 Retention Practices
The authors have selected HR practices for this study based on HR literature reviews and on referred
motivation theories (Torrington, et. al, 2008; Griffeth & Hom, 2001, Branham, 2001, Cummings & Staw,
1997). They are: 1) Goal setting 2) Compensation and rewards, 3) Culture 4) supervision and 5) Growth
opportunities. The main purpose of using these approaches is to motivate employees to perform
effectively and retain those who add values to organizations. The authors of this thesis track the
Maslow’s hierarchy of needs theory and integrate retention practices with other significant theories.
3.5.1 Goal Setting
Goal setting is another widely recognized motivation theory. “People select goals that are related to the
fulfillment of their needs and aspiration and the seeking of goals is central to the process of living itself”
(Locke & Latham, cited in Cummings & Staw, 1997:72). Goals stated in a job shapes employee’s
expectance and lead them to satisfy their needs of self-actualization. They need to be respected that
their skills and talents can fully be use and need senses of success for trying to excess their potential.
Thus, as Cummings & Staw stated, in order to motivate people, setting goals are better than no goals,
difficult goals are better than easy goals, and specific goals are better than general goals (1997:72).
These specific task goals are taken from the broader organizational vision.
Balanced scorecard measurement system has been widely recognized as an organizational goal guide for
many years. Other than traditional financial measurement, the balanced scorecard implements three
other perspectives: customers, internal business process, and learning and growth (Kaplan & Norton,
1992:3). It guides organizations to use a balanced approach to track financial performance and, at the
same time, explore intangible capability for future growth. However, a high level scorecard does not
drive daily activities. Companies need to translate their visions and drop them down to groups and
individuals. Communications drives employees’ contribution to the organization and in turn increase
18
commitment and motivation. However, employees would never be motivated if there is no certain
outcome from their efforts. So one important part of goal setting is feedback which measures one‟s
progress toward goal attainment (Cummings & Staw, 1997: 75) Feedback can be in different types and
forms. One common type is pay. And it can also be information which can be delivered from either
upward or downward, so both to superiors and from superiors (Cummings & Staw, 1997: 75).
3.5.2 Compensation and Rewards
The most basic organizational support for employees’ security needs is pay, and this is strongly related
to equity and expectancy theory. Under fierce competition within the labor market, offering higher pay
tends to attract most employees because, based on equity theory, people may no longer think about
alternative jobs when they feel they are being treated equally after comparing their rewards with
others. However, traditional pay approach has two problems. One is that this it is very costly to pay at a
high level throughout the company. Another problem is that employees with better performance would
feel it is unfair if they will receive the same amount of rewards as those who perform poorer (Lawler &
Jenkins, 1992:8). Although as Hygiene-Motivator theory says that pay is only a source of dissatisfaction if
it is too low, but can never be motivators, pay can be a motivator when it is a form of recognition. The
practice “performance based pay” appears frequently in recent literatures and articles (Lawler &
Jenkins, 1992, Cummings & Staw, 1997, Torrington, et al., 2008; Griffeth and Hom, 2001). Pay for
performance can be referred to flexible pay or incentives and it tends to drive employees by the needs
for achievement. It can be explained by expectancy theory that motivation would increase when
employees perceive they would receive a certain outcome from their performance. In order to let
employees believe the relation between pay and performance exists, the connection between
performance and rewards must be visible (Lawler & Jenkins, 1992:13).
3.5.3 Culture
Besides the need for achievement, people need affiliation and respect. These unsatisfied needs are
presented as tension which drives people to move to match their belief and values with their co-workers
or organization as a whole. In other word, as Cummings & Staw (1997:100) argued, employees’
motivation is strongly affected by their co-workers’ attitude and directed by social rewards and
punishments. These employees’ motivation and commitment are influenced by organizational climate
and culture. This is not about creating the “best” climate or culture but about matching personal needs
and preferences with organizational beliefs and value efficiently (Cummings & Staw, 1997:104). Apart
from informal impacts from group norms and key co-workers, beliefs and expectation can also be
shaped by formal orientation and training programs which should be conducted initially for newcomers.
This is known as socialization which is the most successful approach for newcomers to learn
organizational culture in a short time (Jones, 2010:207). Throughout the socialization programs,
organizational history, tradition and mission may be introduced in order to enable employees to feel
involved and to understand how to behave.
19
3.5.4 Supervision
Other than being involved with co-workers, employees strongly need to be recognized and respected by
their direct supervisor. The earlier leadership research emphasized two leaders’ behavioral functional:
initiating structure (task direction) and consideration (employee-centered) (Truckenbrodt, 2000:234). As
Storey’s model (Storey, 1995:6) emphasizes, line managers play an important role as HR. Leader-
Member Exchange (LMX) theory, provided by Grean and his associates, is recognized more recently.
LMX suggests supervisors to develop a high quality relationship with their subordinates. High quality
supervisors offer their subordinates inducements that “go beyond the formal employment contract,
such as job description, participation in department-wide decision, detailed news and feedback, and
social support” (Griffeth & Hom, 2001:86). In exchange, these subordinates are expected to worker
harder, perform better, and take more responsibilities. On the contrary, subordinates would in turn rely
on formal employment contract with limited prescribed trust and support if there are few rewards from
their supervisors (Truckenbrodt, 2000:234). High LMX strongly provide a way of shaping expectations
and increase commitment. Based on expectancy theory, employees regard social rewards from their
supervisors as an outcome, which lead to better performance. According to Herzberg, more recognition
leads to more job satisfaction and motivation. In order to form high-quality social exchange between
supervisor and subordinates, Grean suggested that organizations should support leadership program to
instruct leaders to learn how to exchange better performance from their subordinates (Griffeth & Hom,
2001:86).
3.5.5 Growth Opportunities
According to hierarchy of needs theory, people develop their need for self-actualization if all of lower
levels of needs are satisfied. Motivator-hygiene theory suggests that growth and advancement can
generate satisfaction and in turn motivate employees. Studies found that in order to satisfy this level of
needs, organizations should support both opportunities for skills development and career development
(Ramlall, 2004; Torrington, et al., 2008; Branham, 2001). Learning is a process for being self-fulfilled
which is something people pursue. Employees with few training may lose a sense of security and
ultimately loyalty. However, trained employees would re-measure their improved knowledge or abilities
with their future outcomes. If one cannot perceive that they would receive a better reward or position
which is properly matched with their new abilities, they would feel unrecognized and would not put
forth all of their efforts. Consequently, they would lose commitment and motivation within their current
company and tend to develop their career elsewhere. In short, in order to keep trained employees,
organization need to offer more visible internal growth opportunities. Growth lies on the top level of the
needs theories (Maslow, 1970; Ramlall, 2004). From the perspective of McClelland’s theory, it provides
opportunities for satisfying all needs of achievement, respect and power. However, self-actualization
means different from person to person (Maslow, 1970:22). Someone, depending on his/her own
expectancy, might just want to have a suitable job instead of being powerful. Thus, many organizations
nowadays are no longer offer traditional career opportunities. Instead of pathways, there are now grids
provided for employees, so that upward, lateral, diagonal and even downwards moves can be made
20
(Torrington et. al., 2008). Sideways movement, meaning moving to another area of work within the
same company, for example engineer to HR manager, also provides varying experiences and can make
the work more interesting (CIPD, 2010).
3.5.6 Summary
On the basis of above discussion, it can be concluded that in order to retain critical employees, an
organization should pay attention to satisfying individuals’ psychological needs. A person who newly
enters a company might need considerable salaries and nice working environment. However, these
hygiene factors are not sustainable factors for employee retention. Among these psychological needs,
self-actualization lies on the top of the hierarchy and is an important driver of motivation. As soon as the
basic levels of needs have been satisfied, organizations should enhance their retention approaches in
the “self-actualization” level, for example, designing a challenging job, setting pay-for-performance
rewards system, developing supervision quality for recognition and offering development opportunities.
In other word, the most effective way to retain key employees is to increase their commitment and
motivation on their jobs instead of just satisfying their hygiene needs. Additionally, based on expectancy
and equity theory, the fundamental point of using these approaches is to enable employees to perceive
that the organization cares about individual development and treat them equally. As a result, rewards
and recognition should be visible and communication should be frequently conducted within an
organization. As long as individuals feel their company care about them, they will contribute to the
company in exchange. The authors illustrate how retention methods in this thesis can be explained by
referred motivation theories in the table below.
Table: Relationship between Motivation Theories and Retention Practices
Retention Motivation Theories
Goal setting Needs theory: satisfying needs of achievement and self-actualization
Expectancy theory: shaping expectancy
Compensation and rewards Motivator-hygiene theory: recognition as a motivator
Expectancy theory: shaping expectancy by visible relationship between
performance and rewards
Equity theory: pay equally
Culture Expectancy theory: shaping expectancy
Supervision Needs theory: satisfying needs of respect and recognition
Motivator-hygiene theory: recognition as a motivator
Expectancy theory: shaping expectancy by feedback
Equity theory: treat equally
Growth opportunities Needs theory: satisfying needs of self-actualization and power
Motivator-hygiene theory: personal growth as a motivator
Expectancy theory: shaping expectancy
Equity theory: equal opportunities
(Own creation)
21
4. EMPIRICAL FINDINGS
Here the empirical data is discussed by looking at selection and retention respectively. Firstly, a short
company overview is given.
4.1 Company Background
Länsförsäkringar Alliance consists of 24 local and customer-owned regional insurance companies and
the jointly owned Länsförsäkringar AB. It deals in banking, insurance and real-estate. Animal insurance is
offered through Agria Djurförsäkring. All of Länsförsäkringar’s business activities are conducted in
Sweden (Länsförsäkringar Bank, 2009). What is unique about LF is that it is customer-owned and there
are no external stakeholders involved. LF has almost 3.4 million customers and approximately 5,800
employees in the whole alliance. In 2010 they were the fifth largest retail bank with over 800,000
customers and a business volume of 232 billion SEK (Länsförsäkringar Bank, 2010). One of the local
branches is Länsförsäkringar Bergslagen (LFB) which has 230 co-workers and is located in Västerås,
Örebro, Karlskoga, Lindesberg, Sala and Köping (Länsförsäkringar Bergslagen1, 2011).
4.2 Selection
Since LFB deals in the financial sector most of their employees are highly skilled and educated.
Employees are even stated in their 2010 annual report to be the corporation’s most important resource
(Länsförsäkringar Bergslagen, 2010). In the 2010 LF bank’s annual report there is a lot of emphasis put
on recruitment and being a strong brand and a healthy workplace that attracts skills. Being an attractive
workplace is important to LFB and they are proud to exhibit their successes in surveys like Universums
Företagsbarometer where they were chosen to be “the Insurance industry’s most attractive employer”,
which is a major sign that employees are important to LFB and so is the process of recruitment and
selection (Länsförsäkringar Bank, 2010:17). Ann-Christin Palmer, the chief of personnel at LFB discussed
with us some of the selection methods used in LFB.
4.2.1 Structured Interview
The interview is the most common and effective method which is used for all levels of recruits in LFB. In
LFB it is considered to be good to have more than one interview with one candidate and with more than
one interviewer, in order to get a more objective picture of the person. During the selection process
there is often one fast interview done first then Palmer and others in chief positions conduct deeper and
longer interviews for those who have gone through. Interviews at LFB are structured and there is a
template of specific questions for a certain position that all interviewers follow. They usually ask about
background, education, family situations, previous job experiences, how well they liked the job, future
plans, previous job achievements which is especially important for sales representatives, etc. LFB does
conduct job-analysis before setting the interview questions to ensure that the questions match the job.
The rating method of the candidates are decided depending on what type of candidate they are looking
22
for but the candidates are usually graded on a scale of 1 to 5. There is no interviewing course offered
for the chiefs. Different interviewers have different approaches and usually, according to Palmer (2011),
they can take care of the interview very well based on their rich experience. Otherwise, Palmer, who is
trained in interviewing, participates in the interview with them, especially when it comes to chief
positions. This way the chiefs that conduct interviews learn from her while they are beginners at
interviewing (Palmer, 2011).
4.2.2 References
The second effective method according to Palmer (2011) is references, especially from previous bosses,
because current ones may not be so objective and they might even want the person to leave their
organisation and give a positive reference to get rid of them. References can be subjective but that can
be solved by getting more than one reference and they usually are asked from specific jobs that the
candidates haven’t given out themselves. This is one way to avoid bias positive references (Palmer,
2011).
4.2.3 Tests
There are other selection methods which are used for recruiting some specific employee groups. Tests
and profile-analysis are used for sales representatives to find out what kind of personality they have and
what drives them. For chief positions psychological and cognitive tests are used. There was also
intelligence tests used by the company in the past, however, it was removed later because according to
Palmer, those tests didn’t enable them to conduct the recruitment and selection process better. One
reason is that it doesn’t mean that candidate can manage other aspects of the job just because they
show their intelligent on paper (Palmer, 2011).
4.2.4 Assessment centres/Work samples
Assessment centres are not frequently used but sometimes LFB send employees who they think can
become bosses or leaders, mostly young employees who are under 35 years, to their service company
LFAB. But it is for higher positions, which can be understandable as assessment centres can cost a lot for
the company. LFB doesn’t use assessment centres or work samples in their own branch, for that they
send candidates to Stockholm. There they go through some tests and do presentations during a whole
day just as it is common in an assessment centre (Palmer, 2011).
4.2.5 Predictive Validity vs. Costs
Palmer believes these methods of selection do help the recruiters predict the candidates' future job
performance, although it hasn’t been measured specifically, but more derived from Palmer’s
experience. She believes that getting the right people for the right job is more important for the
company than reducing costs for recruitment and selection. Sometimes they may choose a person who
they know won’t stay at that specific job for very long. But it isn’t that they choose the wrong person for
the job per se but might be the case that that person will move on to other positions. They know it is not
23
rare for employees to climb upwards within the company after being recruited. But there is a problem of
not enough chief executive positions to be promoted to in LFB because those people tend to stay in
their position for a long time (Palmer, 2011).
4.3 Retention
LFB wants to retain the employees who add value to the company. In LFB, every employee’s
performance is measured by a balanced scorecard that shows whether employees have reached their
goals or not. They believe employees’ satisfaction and motivation is highly related to customers’
satisfaction and organizational competitiveness (Länsförsäkringar Bank 2009; Länsförsäkringar Bank,
2010). A sales person who works with businesses and sells pension and safety plans, for example, costs
LFB about 1 million Sek to train and internally educate and it takes up to 4 years to reach that position. If
they are unsatisfied with the job and leave LFB, even more costs would incur due to lost customers that
that sales person might take with them. LFB pays much attention on employees’ attitudes. Exit
interviews are always done by HR for every employee that leaves where they ask how they feel about
supervisors, induction programs, relations with co-workers, salary development and they also ask about
tips of things that could be done better. Except for unavoidable turnovers such as due to employees
relocating, the most common reason for turnover is not enough development opportunities to climb
upwards, or lower salary compared to an alternative employer (Palmer, 2011). However, LFB’s turnover
rate is very low. And based on the annual employee survey which studies employee commitment, skill,
requirement, responsibilities and authorities in a performance index, the result of 4.1 of a total of 5.0 in
2010 indicates that the employees in LFB are highly motivated and committed (Länsförsäkringar Bank,
2010:16). LFB’s retention methods are described in detail as following:
4.3.1 Goal Setting
LFB managers measure employees’ performance by using a balanced scorecard where each employee’s
personal approach, direction, success-factors and goals are stated from four perspectives: the client,
economy, co-workers and work method. That is a clear way for employees to put their goals on paper
that are annually prepared and documented by each employee’s immediate supervisor. Employees then
follow the goals and judge by themselves whether they can reach it or not and why. Feedback then on
their overall performance is delivered from their immediate managers twice a year; at mid-year and at
year-end (Länsförsäkringar Bank, 2009:16). If employees have not reached their goals, they can then
discuss the matter with their supervisor and figure out a plan to reach the goals in the future. For
example, a sales representative’s goal might be to sell 100 villas and if they’ve only sold 50 then their
boss and them might sit down and discuss why they haven’t that goal and try to come with a strategy to
help them reach it (Palmer, 2011). The balanced scorecard indicates that the performance is not only
measured by target fulfillment but by employee’s method and progress. As an example, in Palmer’s
scorecard her approach is divided into 4 categories.
24
My approach to clients is: to give fast and effective service, to be active and give suggestions based
on the clients’ needs, and to work for a higher client involvement.
My approach to economy is: to be cost-conscious and to constantly think about profitability.
My approach to co-workers: is to work together, show understanding and listen, be positive and
encourage, be loyal to the company and to give and take constructive criticism.
And lastly my approach to my work method is: to use my competence to come up with
improvement suggestions, to actively adopt new work methods, and to be positive in my work.
(Palmer, 2011)
4.3.2 Compensation and rewards
As pay is the most visible benefit which is something employee compare with, it takes an important role
on attracting employees in the first place. However, LFB is not market leader in salary and they never
market themselves that way either. LFB doesn’t believe that offering higher salary is a good strategy for
retaining staff when they are offered higher salary at another organization as an incentive to switch
employers. They know that if they did so for keeping some desired employees, many more would come
to them and ask for higher salary.
Except for salary, they offer money equivalent compensation such as medical insurance, health
maintenance and other benefits in the form of 3 paid work-free days a year on top of vacation days and
38.75 working hours per week instead of 40. Due to supporting healthcare benefits, the illness absence
in LFB has been below 3.0% in the recent years. They also offer staff discounts at the bank. As Palmer
says, “It’s important for us that our employees have us as their bank and insurance, not only because
they get good deals.” Besides, LFB offers performance based remuneration which is less costly than
fixed salary. Remuneration is extra compensation system which may be paid to all employees for their
excellent performance. They have 2.5 percent of the total salary sum and of that they give out different
amount to different employees based on their performance. Everyone has chance to get more money
when they reach any targets and there are no special bonuses for chief executives (Palmer, 2011). A
basic prerequisite for paying the extra remuneration is that the Länsförsäkringar AB Group has positive
results before appropriations and tax (Länsförsäkringar Bank, 2009:16). However turnover does exist
when an employee prefers higher fixed pay rather than performance based salary.
4.3.3 Culture
As a banking operation, LF is a stable performance-based company whose core value is trust,
commitment and openness. Different from the traditional bank, it is responsible for “providing the 24
local, regional insurance companies with the conditions for growth and success in their markets”
(Länsförsäkringar Bank, 2010:16). Palmer further emphasized that LFB is a customer-owned federation
instead of a stock corporation. So if the company has a good year they would send money back to their
clients. Last year they gave back 100 million Sek to their customers. This can mean a lot to LFB’s sales
25
representative since they can give back to their clients, specially for example for a small business owner,
they can get back 40, 000 and this may make their sales representative proud to be a part of LFB and
this is a special characteristic of LFB culture. Before starting their job, employees are trained by
individual induction program. As Palmer said, different people need different training, based on their
competencies (2011).
4.3.4 Supervision
Supervisors take an important role to recognize employee’s performance. As Palmer said, except for
target achievement measurement, employees are also recognized by nearest manager by being offered
praise or development opportunities. Sales people there especially need some special praise sometimes
for good performance because their jobs are very much based on performance in the amounts they sell.
On the other hand, based on the scorecard, if an employee has not reached his/her target, as
mentioned before, their supervisor have responsibility to sit down with him/her to discuss why they
haven’t reach that goal and try to come with a strategy to help to reach it. LFB pays much attention on
selecting good leaders. Palmer, as the Chief of Personnel, sit down with the CEO once a year and discuss
who wants to develop to chief positions then they can decide who to send to their assessment centre in
Stockholm. After undergoing different assessment tests, candidates are provided a specific training
programme. Except of personal development, and implementing change, the training programme
includes leadership style, motivation and driving force. After one has been promoted as a leader, a
leadership index survey, including management, target and result orientation, and career-development
discussion with fellows, is conducted every year. (Länsförsäkringar Bank, 2008:18)
4.3.5 Growth opportunities
LFB has a special approach to increase internal mobility to develop employees. That is a career
development discussion which is conducted every year where managers have conversations with
employees about their career and development and how work is going for them and their future plans.
This approach encourages employees to plan for their own skill development and communicate career
development opportunities for promising managers (Länsförsäkringar Bank, 2009:16).
LF offers two training programmes— Eurekans and Ashridge-- annually for nominated employees.
Eurekans is a programme that is mainly provided for younger employees who will grow into a manager
in 3 to 5 years’ time. Ashrige is a programme that is primary offered to senior-level managers, company
presidents or members of managerial groups (Länsförsäkringar Bank, 2008:18). Besides, Palmer thinks
that offering career development opportunities is the most important strategy for retaining key
employees. They do have internal recruitment and put up job advertisements internally initially before it
goes public. Palmer emphasizes that the career development discussion is probably the most successful
strategy for avoiding unwanted turnover by finding out if they are unhappy about something so that
they can change it. They do it at least once a year and believe this helps employees perform better.
26
However, according to LFB, career development is the most effective method but, on the other hand, is
the most common factor of turnover. Lots of employees want to climb upward too fast. While some
positions not exist in Västerås but in Stockholm or may not even exist in the company since few high
level positions are available. Sometimes different projects may be found for who need for promoting
but it not always enough (Palmer, 2011). Palmer further emphasized that too high ambition to move
upwards too fast should be avoided. Otherwise it will outcome in turnover which is difficult to be
avoided.
5. ANALYSIS Here we analyse the empirical data of Länsförsäkringar Bergslagen by comparing it to the theoretical
concepts discussed in chapter 3, and we assess in which ways LFB is following what the theory and
researchers say and which way it isn’t.
5.1 Selection
We firstly look at the selection methods from the theoretical point of view, comparing and contrasting it
to LFB’s practices.
5.1.1 Interviews
Researchers in this area clearly state that structured interviews are better to see whether a person will
be good at a job than an unstructured one and since LFB uses the structured method, it shows that they
are using the practice that is favored by multiple researchers, amongst others, Schmidt and Hunter
(1998). Using a fixed format and set of questions that are consistent for all interviewees and
interviewers is important to avoid bias (Cook, 2005). LFB does use a template of specific questions
position that all interviewers follow. This ensures that the interviewer and the candidate aren’t merely
having an informal conversation between themselves. LFB also does a job-analysis for the jobs being
interviewed for, which ensures that the questions are job-related and this makes the interview process
predict the candidate’s future job performance better (Cook, 2005:49). LFB also tends to use a rating
scale of 1 to 5 so that different interviewers have a tool to compare their judgements. In these respects,
LFB follows the best practice method preached in the literature.
However, researchers stress the importance of training interviewers in order to avoid bias, and although
interviewers at LFB learn how to conduct interviews from Palmer, and she herself is trained, the other
interviewers don’t get any formal training from any classes or courses. This may be a drawback because
lack of training can lead to bias in judgement (Price, 2007). Palmer also states that every interviewer has
their personal approaches, but it is important that every interviewer is still consistent, so that one
candidate doesn’t get the job over another candidate simply because one interviewer took a lighter
approach to the interview than another interviewer who was a lot stricter. Since interviewing is the
most common selection method used by LFB, it is important that issues such as consistency and avoiding
bias are assessed. As mentioned earlier, the interview is probably the best way to enable an exchange
between the employer/interviewer and the candidate, which is important to the candidate’s perception
of the employer according to the exchange model (Newell, cited in Bach, 2005:142). LFB should realize
27
that even during the interview they are marketing LFB so the interview process needs to be pleasant,
because if it is unpleasant, that may be how the candidate will remember the company even once they
have been hired. From the interview process the interviewer should assess whether the candidate’s and
the company’s norms and beliefs and goals match, and hence whether they can work together. Seeing
the interview as a two-way stream will only help both parties involved.
5.1.2 References
References are not deemed as a very reliable or valid selection method as they can lack objectivity
(Cook, 2005:72). Since the candidates usually choose themselves who they leave as references, their
control may lead to leaving out employers at jobs where they performed badly. However, this was
brought up in the interview and Palmer states that one way she battles this is by asking for references
from previous jobs as previous employers may be more objective and may not be thinking about their
own benefit as much as current ones. She also asks for references from employers that the candidates
didn`t give out themselves, which gives the candidates less power to only put forward references who
will give positive reviews. However, since there are better methods out there with better predictive
validity, like work-samples or assessment centres (Cook, 2005), one shouldn`t rely on references too
much and it shouldn`t weigh too much in the selection process against other methods.
5.1.3 Tests
LFB uses tests and profile-analysis to find out more about candidates personalities, so they can be seen
as personality tests which has a correlation coefficient of 0.4, which isn`t a too poor score but neither a
high one (Pilbeam & Corbridge, 2006). Again the question of job analysis arises because the questions
on the personality tests, or any other tests should be job related (Jenkins & Griffith, 2004). To test the
right attributes of a person is very crucial, otherwise the tests are meaningless. Personality tests may
work as an additional test but should not be the sole determiner for any personnel selection. Here it is
important to look at this from the social process model’s point of view. As stated earlier, it is imperative
that the questions don’t offend the candidates or impact them negatively since it may affect their
attitudes toward the company (Newell, cited in Bach, 2005). Also, from the exchange model’s point of
view, this method is not a very good one because this test is solely a one-way stream. The employer may
find out information about the candidate but the candidates don’t find out anything in return. They
can’t learn about the company and assess how well their norms and beliefs match on a one-way stream.
This is why complementing tests with an interview or discussion will be advantageous. Combining a
cognitive test with a structured interview increases the predictive validity to 0.63, and therefore is
something to consider (Schmidt & hunter, 1998).
5.1.4 Assessment centres &Work samples
As already mentioned, assessment centres are praised in various literatures on selection methods, one
of the reasons being that candidates can showcase a bigger range of abilities than they would be able to
with simply one selection method and therefore they deem it as fairer (Arnold & Sylvester, 2005). The
predictive validity of assessment centres is quite high: 0.7 (Pilbeam & Corbridge, 2006) and therefore
28
should be used more extensively. However the drawbacks are that they are expensive to carry out. You
need a venue and professional assessors and since AC’s are labour intensive it will be costly to train and
hire the assessors. There is no point in planning and preparing such an expensive process of selection
only to have untrained, biased assessors who can’t judge fairly and pick the best candidate for the job
according to their skills. Therefore it is understandable that LFB only uses this method for high-positions
and for young candidates who may stay a long time in the company. However, Palmer does state that
predictive validity is more important to LFB than the cost, that getting the right employees is the most
crucial objective. In that case perhaps assessment centres can be used more extensively in LFB, since it is
far better than only relying on interviews. The best way to see if someone will be good at the job is to
make them do the job, or at least similar tasks of the job. Therefore work-samples should also be used
more extensively, if the cost is not an obstacle. However, one limitation we see here may not be the
cost, rather space and time. By space we mean that LFB may not have a venue sufficient enough to
conduct these tasks and the staff may not have enough time to judge candidates over an extensive
period of time.
From the theoretical point of view, one can take the stance of the social process model and remind
companies that whatever the selection process, it should not that unpleasant that it ruins the
candidates view on the firm. One way that can apply for AC’s is perhaps the length of the duration of all
the tests combined. Some AC’s can be from a half a day to three days long (Arnold and Sylvester, 2005)
and therefore it should be planned according to the comfort of the candidates, with sufficient breaks
and time to relax and consume food and drinks.
5.2 Retention
Based on the study of LFB, employees are seen as source of competitive advantage rather than factor of
production, which can be connected to the soft approach of HRM. LFB believes organizational growth
and competitiveness is highly connected with employees’ competence and commitment. After suitable
employees have been selected, it’s more essential to encourage and develop them to contribute their
efforts on the company. Consistence with the expectation of the theoretical study, employee motivation
is associated with the selected HR practices. Except for the feedbacks from the job itself, motivation is
more significantly affected by employees’ expectancy of visible outcomes from their company such as
rewards, recognition and promotion. The empirical study further indicates that, when employees are
highly motivated and developed, promotion is represented as the most attractive outcome to retain key
employees but that factor is most difficult for LFB to support. Besides, another most frequent turnover
factor in LFB is fixed pay which is a hygiene factor that easily affect on dissatisfaction. Based on the
empirical findings, the practices are further discussed below.
5.2.1 Goal setting
The goals that LFB sets for every employee are clear and cover different task fields. On the balanced
scorecard, different categories of financial, customers, internal business process, and learning and
29
growth, are dropped down to individual perspectives like economy, clients, co-workers and work
method. The goals do not seem that simple to reach since it is connected with performance
measurement and reward system. Paying rewards based on how the company performs as a big picture
reports a positive result, which highly depends on the efforts throughout the company. This approach,
on one hand, encourages and challenges employees to contribute their efforts to a „big picture‟ and on
the other hand, enables them to feel that they are free to handle and balance their tasks by themselves.
Moreover, sense of fulfillment is increased through the process of learning. Commitment and
motivation then increases when employees perceive that they are growing with their organization under
respect and freedom.
However, if the goals are set too difficult, things would be opposite to what one wishes. Seta and
Donaldson (cited in Cummings & Staw, 1997:73) stated that other than increasing motivation, goals can
also increase pressure. According to expectancy theory, people perceive how hard the goal is to be
achieved before they take action and they are only motivated when they feel it is possible to achieve the
performance level. Thus, LFB needs to be careful that goals set for employees are not too difficult but
are based on individual ability and competence.
5.2.2 Compensation and rewards
Pay is a basic need and is the most visible factor that people compare with. Higher pay does attract
people in the first place, however setting a high and equal salary level throughout the company is very
costly for LFB. Based on Herzberg’s (1970) argument, even if LFB increases salary for all existing and
potential employees, short-term satisfaction and attraction may be affected, but there is no significant
impact on long-term motivation. Considering the costs, it is right that LFB never thought about
competing with others on salary.
Benefits are as important as salary when representing security, while playing a more significant role than
salary on enhancing the company’s competitive advantage. Among the benefit packages, healthcare
benefits are increasing nowadays and is something people tend to compare. Benefits do also provide
other options that are difficult to compare with since benefits packages can be different from company
to company. Using staff discounts approach is really helpful for LFB that it, on one hand, increasing
customers by attracting its internal employees and, on the other hand, increase these employees’
commitment and loyalty to work for the company since, as LFB’s customers, they perceive that their
personal profits is highly connected with LFB’s profits and subsequently their performance.
5.2.3 Culture
As Storey (1995) argued, transferring a positive value throughout the company plays much more
significant role on motivation than managing by procedures and systems. As it has been mentioned,
balanced scorecard provides a way to translate organizational vision and strategy to employees and
allow them to participate on organizational growth. Due to the balanced scorecard, a performance
based culture is highly shaped in LFB and tend to influence employees’ expectance that better
30
performance will lead to more respect and recognition. LFB is a customer-own company which pays
back customer when it has good year. Employee would be proud of being a member of LFB if they
perceive that LFB’s profit or growth is highly connected with their efforts. This is a good point that LFB
motivates employees by managing culture instead of procedures. By transmitting these organizational
value and belief to individuals, organization would increase employees’ need intensity for sense of
control and fulfillment, and hence increase their commitment and motivation for working for LFB. Thus,
the faster the organizational culture is delivered to employees, the more efficient the value added on
the organization. Therefore induction programs need to be designed to efficiently transmit LFB’s culture
to newcomers.
5.2.4 Supervision
The empirical findings indicate that direct supervisors play an important role on retaining employees. In
the goal setting approach, supervisors have the responsibility to manage the difficulty level of goals,
which is highly connected with employees’ performance. As already mentioned, too difficult goals may
lead to job pressure and subsequently dissatisfaction, so supervisors should be careful when setting
goals. Supervisors are also responsible for delivering feedback to subordinates which can be conducted
in two ways. One is recognition by offering development opportunities, similar to the function of
monetary reward, could raise employee’s sense of achievement and increase job satisfaction. The other
one is to communicate with poor performers and to reduce their pressures by helping them find the
way to solve the problems, which effectively increases their sense of being respected and consequently
might increase their sense of fulfillment by learning and developing. In order to meet the purpose of
enhancing organizational competitiveness, a leader should transfer positive attitudes to guide
employees to reach organizational goals, vision and mission instead of controlling them by procedures.
However, lots of supervisors are promoted without experiences which might lead to a phenomenon that
supervisors only focus on their own work without paying attention on their fellows’ mood. As Storey
(1995) argued, when being promoted as a supervisor, people play an important role on delivering HR
policies. It can be proved by LFB’s case that LFB understands the importance of supervisors since
importance is laid on selecting managers. Assessment centre, the selection method of high predictive
validity and cost, is used for internal candidates in LFB, which again indicates the important and broad
role of a supervisor.
5.2.5 Growth opportunities
Learning and development can not only satisfy employees’ need for achievement but also tend to fulfill
the organizational need for growth. As Storey (1995) emphasized, employee development is a role of HR
and is a way to achieve organizational competitive advantage. Employees in LFB are encouraged to
acquire knowledge and experience from self-learning and their direct supervisors. Besides, the learning
program itself is a motivator. However, when lower level needs, such as rewards achievements and self-
development, has been fulfilled, employees pursue more career development opportunities as a higher
level of reward for satisfying their self-actualization need. Based on LFB’s case, people are interested in
moving upward, perhaps too fast. When employees’ skills and experience have been developed, they
generally need a higher level of position in order to express their capability fully and have the chance to
31
influence others. That might be why McClelland replaced Maslow’s self-actualization need more
specifically with power need. Communication needs to be conducted in time to match employees’
capability with redesigned jobs to avoid key employees searching for other jobs.
LFB does conduct a somewhat successful retention approach on development perspective. Through
career development discussions, the employer understands employees’ need in time and employees
feel they are respected and cared for by their organization. However, the truth is that LFB doesn’t have
enough available positions to catch up with the speed of employees’ needs for upward growth. One
reason is that a position is currently be taken by a key employee who has developed with years of
abundant experiences. It is not a good choice to replace a good leader with a new one who has less
experience on this specific job. Training and developing a new manager always takes a long time and
money. Another reason might be LFB grows relatively stable with clear career pathways so that the
amount of positions available is quite fixed. Although LFB has taken efforts increase positions by offering
more projects for those with high ambitions, it is not enough. By studying this case, Maslow’s (1970)
viewpoint that self-actualization directs human behavior and is the need that is most difficult to be
fulfilled has been verified. In order to reduce undesired turnover as much as possible, LFB should take
efforts to offer more career development opportunities or to calm down employees’ expectation at very
beginning.
6. CONCLUSION
Here we conclude on our findings of this thesis and try to answer our research question:
How can a firm such as Länsförsäkringar Bergslagen utilize selection and retention methods to find and
keep employees that add value to the organisation?
Drawing from the general HRM model by Storey (1995) we can conclude that employees are a critical
resource in a firm and it is the human resources that give competitive edge, and therefore should be
selected and developed carefully in order to gain their commitment. It is important to look at core
employees from the soft approach and see employees as proactive members of the organisation who’s
commitment is to be gained through communication, motivation and development. The traditional
psychometric/objective model, the social process model and the exchange model can all be used to view
the selection process as it is important to be able to rate the various methods objectively, see how these
methods affects the candidates and view the selection process as a two-way stream with both parties
exchanging beliefs, values and goals. By studying the motivational retention theories, employee
motivation is ultimately driven by the need of self-actualization as stated in needs theory and motivator-
hygiene theory. From expectancy theory and equity theory we can conclude that people’s motivation is
based on their attitudes which can be influenced by others and therefore organisations need to manage
their expectations.
LFB is a company that wants to attract and hire employees who really want to work at LFB, performs
well and achieves a lot. They want to retain people who think LFB is a good place to work. Since
32
performance and achievement are important factors to LFB, they should employ selection methods that
predict their future performance well. They are already using one of the selection methods that have
been found to have good predictive validity and that is also their most common selection method: the
structured interview. LFB has already gotten on a good path by following some recommended practices
of the structured interview like having scripted questions according to the job-analysis and have a rating
scale across different interviewers. However, they could be even better by giving every single
interviewer proper training, as this would help eliminate bias and in turn lead to hiring the best
candidates. Another method that is commended in the literature is assessment centres where
candidates get to exhibit different skills which let the employer get a more holistic picture of the person.
Although this method is a more expensive one, there are clear benefits such as the candidates
themselves deeming it fairer than other methods. For LFB this method should be used more, especially
for higher, managerial levels. Especially since cost is not the important factor for LFB but predictive
validity, this method is preferred over tests and references. However, if the time and personnel for
conducting more assessment centres is lacking, the combined use of cognitive tests and structured
interviews, assuming both are done after a proper job-analysis, is one way to assess candidates well.
Our study indicates that employee retention is not only about how to keep employees within the
organization but more about how to satisfy employees’ psychological needs to motivate them to add
value to the company. We have learnt that employees that are motivated will stay in the company
longer. When an employer cares about it and successfully supports techniques on it, satisfied employees
would contribute more efforts on their organization in exchange and subsequently grow with it.
Retaining employees by motivating them represents as a win-win approach. In general, the result from
the empirical research is consistent with the theoretical model. The empirical study verifies the theories
that organizational policy and salary are more likely to be the causes of dissatisfaction but not of
motivation. Instead, organizations should influence employees’ behavior by offering challenging jobs.
Moreover, there is no denying the fact that feedbacks or rewards are essential to motivation since they
are directly linked to employees’ top needs. LFB does support performance based rewards and internal
development discussion. However, offering development opportunities is indicated as the most
significant method for retaining critical employees but the most difficult one to be conducted for LFB.
More attention should be paid in this area to strengthen LFB’s retention abilities. The research further
verifies Storey’s model that managing human resources is not only the responsibility of HR but mostly be
shared by the line managers who can directly affect employees’ attitude. As a result, in generally, LFB
does conduct effective retention practices for enhancing organizational competitiveness. And these
practices, more or less, form an organizational culture with a high commitment, which has long-term
impact on the organizational development.
All in all, the way a firm such as Länsförsäkringar Bergslagen can utilize selection and retention methods
to find and keep employees that add value to the organisation is by using selection methods with high
predictive validity such as structured interviews, cognitive and personality tests, work samples and
assessment centres, while at the same time considering how these methods affect the candidates
attitudes and how well they allow for the candidate and employer to exchange views, values and goals.
The retention method that can be utilized to retain valued employees is managing motivation by
33
catering to employees’ high-level needs such as self-actualization. Retention practices that help in doing
that include: offering challenging jobs with clear and difficult yet attainable goals, having fixed pay as
basic security with added performance based pay, transmitting culture through induction programs
while linking individual goals to organisational vision and mission, providing feedback from supervisors,
and finally, offering more development opportunities. Now, most of these LFB is already doing. What
they are not doing or could be improved upon is mentioned below in our recommendations to them.
6.1 Recommendations
From our study we have found a few gaps that could be narrowed between the theory, models and
literature, and LFB’s practices.
Firstly we recommend that LFB formerly train all the interviewers involved in the interview process as
many authors advocate the importance of properly trained interviewers. Even though the other
interviewers in chief positions learn on the job from the chief of personnel, it would not hurt to take a
professional course. It would only increase their competence. Secondly we recommend an increase in
the use of assessment centres , especially for internal recruitment. It is a method that is favoured by
candidates and allows you to judge the people on different levels. If cost is no factor, this costly method
could be implemented more for high positions. If cost does become a factor, combination of cognitive
tests and structured interview is recommended as it scores highly on predictive validity. As of today
tests are only used for chief positions but this combination would be useful for bankers and salespeople
and other employees as well, not only for chief positions. Thirdly we recommend not to rely on
references too much as they are only subjective opinions of a human being and it does not have high
predictive validity. It may be good to get a picture of a person but someone may have performed poorly
at a previous job for many reasons and it doesn’t have to mean that will perform poorly at this job. It is
better to test their ability to perform at the job at LFB with e.g. work samples. Fourth, we recommend
offering more attractive benefits and rewards fit individual differences, such as offering childcare
vouchers for employees who has children but additional pension for elders. Fifth, encourage supervisors
to praise their subordinates more than twice a year, as feedback is important. And lastly, we
recommend communicating job opportunities to employees more timely. Except for promotion, it can
be projects, sideward development or a job opportunity in one of the regional insurance companies or
another city. Otherwise, calming down employees’ ambitions by managing their expectation at the very
beginning is vital.
34
References
Arnold, J. & Sylvester, J. 2005, Work psychology: understanding human behaviour in the workplace. 4th ed. [E-book], Available through: <http://www.dawsonera.com> [accessed 14 April. 2011]. Auerbach, C. & Silverstein, L. 2003 Qualitative Data. New York: NYU Press Bach, S., 2005, Managing Human Resources: Personnel management in transition.4th ed. Oxford: Blackwell Publishing. Bach, S. & Sisson, K., 2000, Personnel Management: a comprehensive guide to theory and practice. Oxford: Blackwell. Branham, L. 2001, Keeping the people who keep you in business: 24 ways to hang on your most valuable talents, New York: AMACOM Bratton, J. & Gold, J., 2007, Human Resource Management: Theory and Practice. 4th ed. New York: Palgrave Macmillan
CIPD, 2010，Employee turnover and retention，[online] Available at: <http://www.cipd.co.uk/hr-resources/factsheets/employee-turnover-retention.aspx>, [accessed 23, April, 2011] Cook, M., 2005, Personnel Selection: Adding Value through People, 4th ed. West Sussex: John Wiley & Sons Cummings L.L., Staw Barry M., Volume 19, 1997, Research in Organizational Behavior, Greenwich: JAI PRESS INC. Edenborough, R., 2005, Assessment Methods in Recruitment, Selection, and Performance: A Manager's Guide to Psychometric Testing, Interviews, and Assessment Centres. London: Kogan Page Evers, A., Anderson, N and Voskuijl, Olga, 2005, Handbook of Personnel Selection. Wiley-Blackwell [Online] Available at: <http://books.google.com/books?id=lQof2o4rJccC&printsec=frontcover&dq=Handbook+of+Personnel+Selection+evers&hl=en&ei=jU7dTePiN4ed-waumqjTDw&sa=X&oi=book_result&ct=book-thumbnail&resnum=1&ved=0CC0Q6wEwAA#v=onepage&q&f=false> [Accessed 11 11 May, 2011] Fisher, C. 2007, Researching and Writing a Dissertation, 2nd ed. Harlow: Pearson Ed. Ltd. Foot, M. & Hook, C. 2005, Introducing Human Resource Management. 4th ed. Harlow: Pearson Ed. Griffeth, R. Hom, P. 2001, Retaining valued employees, California: Sage Publications, Inc. Herzberg, F, 1997, the Motivation to Work, New Brunswick: Transaction Publishers Herzberg F, 1987, One More Time: How Do You Motivate Employees? Harvard Business Review, September-October issue HR-Guide, 2001, HR Guide to the Internet: Personnel Selection: Methods: Work Sample Tests. [Online] Available at: <http://www.hr-guide.com/data/G316.htm> [Accessed: 14th April, 2011].
35
Jenkins, M. and Griffith, R., 2004, Using Personality Constructs to Predict Performance: Narrow or Broad Bandwidth. Journal of Business and Psychology, Vol. 19, Issue 2, p. 265. Jones G, 2010, Organizational Theory, Design and Change, New Jersey: Pearson Education, Inc. Kaplan R. S. and Norton D. P., January- February 1992, Measures that Drive Performance, Harvard Business Review Krishnan, Venkat R., 2005, Leader-Member Exchange, Transformational Leadership, and Value System, 10[1], pp.14-21 Lawler E.E. & Jenkins G..D, 1992, Strategic Reward Systems, Arkansas: CEO Publication Lawler, E. E. 2000, Rewarding Excellence: Pay Strategies for the New Economy, San Francisco: Jossey-Bass Publishers. Legge, K. cited in Storey, J. (1995) Human Resource Management: A critical text. London: TJ Press Länsförsäkringar Bank, 2008, Annual report [Online] Available at: <http://feed.ne.cision.com/wpyfs/00/00/00/00/00/0E/B2/F4/wkr0003.pdf> [Accessed 20 May, 2011] Länsförsäkringar Bank, 2009, Annual report [Online] Available at: <http://feed.ne.cision.com/wpyfs/00/00/00/00/00/10/EC/7B/wkr0011.pdf> [Accessed 20 May, 2011]
Länsförsäkringar Bank, 2010, Annual report [Online] Available at: <http://feed.ne.cision.com/wpyfs/00/00/00/00/00/15/01/E5/wkr0001.pdf> [Accessed 20 May, 2011] Länsförsäkringar Bergslagen, 2010, Årsredovisning[Online] Available at: <http://www.lansforsakringar.se/privat/om_oss/bergslagen/Documents/Om%20oss/%C3%85rsredovisning/LFB_2010_AR_LOW.pdf> [Accessed 19 May, 2011] Länsförsäkringar Bergslagen1, 2011, Jobba inom Länsförsäkringarsgruppen [Online] Available at: <http://www.lansforsakringar.se/privat/om_oss/karriar/att_jobba_hos_oss/sidor/default.aspx> [Accessed 20 May, 2011] Länsförsäkringar Bergslagen2, 2011, Länsförsäkringar In English [Online] Available at: < http://www.lansforsakringar.se/privat/om_oss/in_english/sidor/default.aspx> [Accessed 18 May, 2011] Maslow A. H., 1970, Motivation and Personality, 3rd edition, New York: Harper & Row, Publishers, Inc. Newell, S. cited in Bach, S., 2005, Managing Human Resources: Personnel management in transition.4th ed. Oxford: Blackwell Publishing. Palmer, A. (2011) Interview, Länsförsäkringar Bergslagen office in Västerås, 10-5-2011. Pilbeam, S. & Corbridge M. 2006, People Resourcing: Contemporary HRM in Practice, 4rd ed. Harlow: Prentice Hall. Price, A., 2007, Human Resource Management in a Business Context. 3rd ed. E-Book, [online] Available at<http://72.3.142.35/dxreader/jsp/StartReading.jsp?filenumber=1289089308229263&url=http://72.3.142.35/dxreader/jsp/BookLoader.jsp> [Accessed 14 April 2011] Ramlall S, 2004, A Review of Employee Motivation Theories and Their Implications for Employee Retention within Organizations, Journal of American Academy of Business, Cambridge, 5(1/2), pp.52-63
36
Rekryteringskanalen, 2011, Över 100 000 fler lediga jobb under 2010 Available at: <http://www.rekryteringskanalen.se/Jobbnyheter/oever-100-000-fler-lediga-jobb-under-2010.html>, [Accessed 14 May, 2011] Sackett, P.R., Borneman, M.J. and Connelly, B.S. (2008) High-Stakes Testing in Higher Education and Employment. American Psychologist. Vol. 63 (4), p215–227. [Online] Available at: <http://psycnet.apa.org/journals/amp/63/4/215.pdf> [Accessed: 8th April, 2011] Sandler, S. 2008, Solving the Riddle of Recruiting and Retention. HR Focus. Vol. 85 No. 4 Saunders M., Lewis P., and Thornhill A., 2009, Research Method for Business Students, fifth edition, Harlow: Pearson Education Limited Schmidt, F.L. & Hunter, J.E., 1998, The Validity and Utility of Selection Methods in Personnel Psychology: Practical and Theoretical Implications of 85 Years of Research Findings. Psychological Bulletin, Vol. 124, No. 2, p. 262-274. [Online] Available at: <http://psycnet.apa.org/journals/bul/124/2/262.pdf> [Accessed: 7th April, 2011]. Steel P; König, C.J., 2006, Integrating Theories of Motivation, 31[4], p.889-913 Vroom, V. H. 1995, Work and Motivation, new edition, San Francisco: Jossey-Bass, cop. SHL, 2008, Personality Questionnaire Examples. [Online] Available at: <http://www.shldirect.com/personality_questionnaire_examples.html> [Accessed: 14th April, 2011]. Storey, J., 1995, Human Resource Management: A critical text. London: TJ Press Truckenbrodt Y. B., 2000, the Relationship between Leader-Member Exchange and Commitment and Organizational Citizenship Behavior, Acquisition Review Quarterly Thornton, G.C. & Rupp, D.E., 2008, Assessment Centers in Human Resource Management: Strategies for Prediction, Diagnosis and Development. New Jersey: Lawrence Erlbaum Associates, Inc., Publishers. Torrington et. al., 2008, Human Resource Management, Edinburgh Gate: Pearson education limited Ullah. M. 2010. A Systematic Approach of Conducting Employee Selection Interview. International Journal of Business and Management. Vol. 5, No. 6.
37
Appendix A
Interview with LFB
Interview Questions from interview with Ann-Christin Palmer at the Länsförsäkringar
Bergslagen office in Västerås, 10/5/2011, 14:00. Interviewed and translated from Swedish to
English by Kazi Quader.
1. What are the most common selection methods used in Länsförsäkringar Bergslagen? Are they the
same for lower-level recruits as with higher-level, high-skilled recruits? Do these methods
predict the candidates‟ future job performance adequately?
2. What is the reason behind which methods you use? Cost-effectiveness or how well they predict
future job performance?
3. Do you use assessment centres or work samples?
4. Do you connect the cost of recruitment and selection to the costs of turnover due to hiring the
“wrong people”?
5. Can you think of a certain instance where a certain selection method was tried but did not work?
6. What selection method do you consider to be most effective?
7. What form of interviewing do you use, structured, unstructured, semi-structured or other? How
important is the interview in the selection process? How much training are the interviewers
given?
8. What are the main general reasons when an employee quits their job?
9. What are the approximate costs from turnover?
10. What methods or strategies are used in Länsförsäkringar Bergslagen to reduce turnover?
11. What kind of employees do you want to retain?
12. What are some of the ways you measure staff‟s performance?
13. Do you have a strategy to be an “employer of choice”, i.e. to be an attractive workplace?
14. How is the work environment built? How do you attract and motivate your employees in terms of
work environment?
15. Can you give us an example of the employee retention strategies that are used? Which are the
most successful? Which are the least?
16. How do you avoid early turnover?
17. Are the wages an important factor to retaining your employees?
38
18. What are the options included in your benefit and compensation packages?
19. How do you and reward achievements?
20. What are the main characteristics of Länsförsäkringar Bergslagens organizational culture? Could
it be a factor in retaining employees?
21. How do you offer and communicate job opportunities for your employees?
22. Do you train and measure your managers‟ skills in order to strengthen retention abilities?
23. Do you have flexible retention offers that are different for different employees?
24. Could you put more resources into retention of employees? Are you doing enough, in your
opinion?
![Rep Päd Teil2.ppt [Kompatibilitätsmodus] · supracondylärer Humerusfraktur. pDMS intakt Welches Osteosyntheseverfahren ist zur Versorgung (Retention) der beschriebenen Fraktur](https://img.pdfslide.org/doc/110x75/5b1516547f8b9a8f548da3f1/rep-paed-teil2ppt-kompatibilitaetsmodus-supracondylaerer-humerusfraktur.jpg)
